The second component involves local revenue, which Forbes estimates to be about $7.29 billion, a portion of which funds MLB’s “Revenue Sharing Plan.”Īs defined by Article XXIV of the CBA, the basis for the revenue sharing plan is a percentage of each team’s “Net Local Revenue”, which is basically the money a team makes in its local market (mostly ballpark and media related receipts) minus the cost of stadium expenses, including debt service. According to Forbes’ estimates, in 2018, about $2.76 billion was allocated in this manner. The first is the Central Fund, which collects revenue derived from national sources (e.g., network TV rights and merchandizing) and then distributes an equal share to each team. MLB really has two revenue sharing components. However, there is enough information available to build an educated model from which to assess the plan’s effectiveness. Not only is the formula very complicated, but the exact inputs remain elusive. Unfortunately, MLB’s revenue sharing plan remains shrouded in a bit of mystery. The MLBPA isn’t convinced that every team is operating in accordance with that stipulation, and the recent trend toward tanking seems to back up their claim. However, according to the collective bargaining agreement (CBA), clubs are supposed to use revenue sharing to enhance their winning percentage, not their bottom line. Because Major League Baseball teams share revenue, but are not subject to a salary floor, teams can pretty much guarantee a hefty profit by maintaining a low payroll.
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